Shares of Happiest Minds Technologies experienced a significant decline, plummeting approximately 10% after the announcement of its transaction with ITC Infotech. This sharp drop has sparked concern among investors, especially given the stock's long history of wealth erosion since 2021.
Despite the immediate market reaction, at least one market expert believes the current selloff might not signal a complete breakdown of the stock’s recovery potential. Hitesh Rathi, a technical analyst from Angel One, appearing on Business Today Television, suggested that Happiest Minds is showing early signs of forming a medium-term base.
Impact of the ITC Infotech Transaction
The broader market's response to the ITC Infotech deal highlights investor uncertainty. While ITC's shares saw gains post-announcement, Happiest Minds came under pressure. This divergence indicates that investors are still evaluating the implications of the planned acquisition and merger, including its effects on valuation, ownership structure, and the integration roadmap.
A History of Underperformance
Rathi acknowledged the substantial damage already inflicted on investor portfolios. Since 2021, Happiest Minds shares have fallen from highs around Rs 1,500 to approximately Rs 400, representing a drawdown of 70-75% from its peak. This prolonged period of underperformance frames the current attempt at a rebound, posing a challenge for investors holding the stock at much higher levels.
Technical Support and Accumulation Strategy
However, Rathi pointed to more constructive patterns emerging on the charts. He highlighted the Rs 330-340 band as a strong support zone, where the stock has formed a bullish double-bottom retest. Additionally, a “W pattern breakout” on the daily chart suggests an early reversal signal, according to technical analysis.
“This current fall… can be utilized as a trigger to accumulate the stock at current levels,” Rathi advised, recommending a strict medium-term stop loss in the Rs 330-335 range.
For the market, the critical factor will be whether these technical support levels hold as sentiment around the deal stabilizes. If the Rs 330-340 zone remains intact, a recovery trade could begin to materialize. Conversely, a breach of this floor could quickly diminish optimism for a turnaround.
This situation presents a high-risk, technically sensitive play for investors navigating the aftermath of a significant corporate transaction. (Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)